Walk the talk: machine learning and big data for procurement analytics

In procurement analytics, there are two clear trends:
1. Data is the new oil.
2. Big data and advanced analytics, such as machine learning, deep learning and neural networks, definitely create new opportunities.

The way we can automatically extract insights from vast amounts of data will both unearth new opportunities as well as move tasks performed by humans to machines.

As these great opportunities exist with a lot of buzz, the big question remains: how do we walk the talk? Sammeli Sammalkorpi, Co-founder of procurement analytics solutions provider Sievo, tries to answer this question.

Join us at Smart Procurement World in 2019! Our exciting theme this year is Walk the talk: high impact procurement. We will explore topics such as policy vs. impact, governance for results and delivering impact at board level.

The market tends to get so excited about opportunities that it forgets about the real challenge. When you think about traditional spend analytics, the challenge is not really around analytical capabilities – Structured Query Language (SQL), visualisation tools and skills are commodities. The challenge is around data acquisition (e.g. how to get valid data out of enterprise resource planning (ERP) and market price sources) and cleansing (how to map different data sources into coherent category structures, etc.).

Even though new technologies do bring great opportunities, data acquisition and cleansing remain challenging.

Today, applying advanced analytics does bring a certain level of competitive advantage. For example, neural network-based algorithms can be used to both support data cleansing as well as to identify opportunities. However, these capabilities are becoming commodities so fast that they will not provide a sustainable basis for competitive advantage. The same thing applies to external data – there are, and increasingly will be, companies that provide structured data sets around market prices, supplier risks, etc., at fairly low prices.

The challenge remains: how to (i) acquire internal data sets, and (ii) combine internal and external data sets to drive value. These challenges will actually be the most difficult to crack since they, by definition, involve internal data sets and, therefore, cannot be solved by cloud providers independently. And, even if source system consolidation (whether ERP-based or procurement suite-based) will drive down the number of sources at one end, the proliferation of new solutions and data sources imply that there will be a data combination challenge for the foreseeable future.

With this, for procurement to create competitive advantage, it needs to master three complementary capabilities:

Companies that have been able to create a consistent spend analysis based on internal data have had a great head-start. They are well positioned to really leverage external data sources and advanced analytical techniques. For the rest…well, it’s going to be a lot of talk, but very little actual walk.

Join us at Smart Procurement World in 2019! Our exciting theme this year is Walk the talk: high impact procurement. We will explore topics such as policy vs. impact, governance for results and delivering impact at board level.